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Supreme Court of India

KIRLOSKAR BROTHERS LIMITEDversusRAMCHARAN AND ORS

Citation
2022 INSC 1255
Decided
5 December 2022
Disposal
Appeal(s) allowed

Holding

In the absence of a Section 10 prohibition notification and without a finding that the contract is sham, contract labour does not become the employee of the principal employer, and the orders directing their absorption are erroneous.

Summary

Kirloskar Brothers Ltd., the principal employer, appealed against orders that reinstated six contract labourers (Ramcharan & others) and directed Kirloskar to absorb them as employees. The labour contract with the contractor (respondent No.7) had ended and the contractor dismissed the workers. The Supreme Court examined whether Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 mandates automatic absorption of contract labour by the principal employer, and whether a master‑servant relationship exists in the absence of a prohibition notification or a finding that the contract is sham. The Court found no documentary evidence that the workers were employees of Kirloskar, noted that control and supervision remained with the contractor, and held that payment of wages or PF by the principal does not create employment. Consequently, without a Section 10 notification or proof of a sham contract, the workers cannot be deemed employees of the principal, and the orders directing their absorption were set aside, restoring the Labour Court’s judgment.

Issues considered

  • Whether Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 implies automatic absorption of contract labour by the principal employer upon issuance of a prohibition notification.
  • Whether a master‑servant relationship arises between the principal employer and contract labour when the contractor engages the labour.
  • Whether the respondents are employees of the appellant in the absence of a Section 10 notification or a finding that the contract is sham or camouflage.
  • Whether relief can be granted under the Madhya Pradesh Industrial Relations Act, 1960 as opposed to the CLRA Act.

Legislation cited

Subjects

contract labourabsorptionSection 10principal employeremployee statussham contractindustrial tribunalstatutory duesreinstatement

Judgment

330                      [2022]REPORTS
               SUPREME COURT   18 S.C.R. 330              [2022] 18 S.C.R.


A                    KIRLOSKAR BROTHERS LIMITED
                                        v.
                          RAMCHARAN AND ORS.
                     (Civil Appeal Nos. 8446-8447 of 2022)
B                            DECEMBER 05, 2022
                  [M. R. SHAH AND HIMA KOHLI, JJ.]
             Contract Labour (Regulation and Abolition) Act, 1970: s. 10
      – Absorption of contractual labour – Concept of – On facts,
      respondents nos. 1-6 were contractual labourers of the respondent
C     no. 7-contractor engaged by the appellant in terms of the contract
      – On labour contract coming to an end, services of the respondents
      were dispensed with by the contractor – Respondents seeking re-
      instatement, on the ground that they were employees of the appellant
      and were orally terminated – Labour Court held that the contractor
      had obtained license under the CLRA Act and that the contesting
D     respondents were the employees of the contractor and not of the
      appellant – Tribunal ordered reinstatement and held that a contract
      labourer automatically becomes an employee of the principal
      employer as per the MPIR Act which was upheld by the Single Judge
      of the High Court, however, set aside by the Division Bench – On
E     appeal, held: No documentary evidence produced that the
      respondents were the employees of the appellant – Even the direct
      control and supervision of the contesting respondents was always
      with the contractor – No evidence on record that any of the
      respondents were given any benefits, uniform or punching cards by
      the appellant – Merely because sometimes the payment of salary
F     was made and/or PF contribution was paid by the appellant, which
      was due to non-payment of the same by the contractor, the
      respondents shall not automatically become the employees of the
      appellant – No notification u/s. 10(1) issued prohibiting the contract
      labour, nor there are allegations and/or even findings that the
G     contract is sham and bogus and/or camouflage, the direction to
      absorb or regularise the services of the contract labour cannot be
      made to the principal employer/appellant – Thus, both the tribunal
      as well as the High Court erred in reinstating the contesting
      respondents and directing the appellant-principal employer to
      absorb them as their employees – Judgment and order passed by
H     the labour court is restored.
                                       330
  KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                        331
                     ORS.

     Allowing the appeals, the Court                                 A
      HELD 1.1 The contesting respondents were the contractual
labourers of the respondent No. 7-contractor, who was a
contractor engaged by the appellant in terms of the contract dated
22.04.1995, which was renewed from time to time. In the instant
case, that no notification u/s. 10 of the Contract Labour            B
(Regulation and Abolition) Act has been issued by the State
Government/appropriate Government, prohibiting the contract
labour. Upon entering into the contract, necessary compliance
under the CLRA Act was also completed by the appellant and
the respondent No. 7-contractor. On the labour contract coming
to an end, the services of the contesting respondents were           C
dispensed with by the contractor. [Para 4][336-B-C]
      1.2 On going through the entire material on record, no
documentary evidence was produced, by which it can be said that
the contesting respondents were the employees of the appellant.
There is no provision under Section 10 of the CLRA Act that the      D
workers/employees employed by the contractor automatically
become the employees of the appellant and/or the employees of
the contractor shall be entitled for automatic absorption and/or
they become the employees of the principal employer. Even the
direct control and supervision of the contesting respondents was     E
always with the contractor. There is no evidence on record that
any of the respondents were given any benefits, uniform or
punching cards by the appellant. [Para 4.1][336-D-F]
       1.3 Under the contract and even under the provisions of
the CLRA, a duty was cast upon the appellant to pay all statutory    F
dues, including salary of the workmen, payment of PF contribution,
and in case of non-payment of the same by the contractor, after
making such payment, the same can be deducted from the
contractor’s bill. Thus, merely because sometimes the payment
of salary was made and/or PF contribution was paid by the
appellant, which was due to non-payment of the same by the           G
contractor, the contesting respondents shall not automatically
become the employees of the principal employer-appellant. [Para
4.2][336-F-G]

                                                                     H
332            SUPREME COURT REPORTS                      [2022] 18 S.C.R.


A           1.4 In the absence of a notification under Section 10 of the
      CLRA Act unless there are allegations or findings with regard to
      a contract being sham, private respondents, who are as such the
      workmen/employee of the contractor, cannot be held to be
      employees of the appellant and not of the contractor. In the instant
      case, neither any notification under Section 10(1) of the CLRA
B
      Act has been issued prohibiting the contract labour, nor there
      are allegations and/or even findings that the contract is sham and
      bogus and/or camouflage. [Paras 4.3, 4.6][336-H; 337-A; 340-E]
            1.5 In the absence of any notification under Section 10 of
      the CLRA Act and in the absence of any allegations and/or findings
C     that the contract was sham and camouflage, both the Industrial
      Tribunal as well as the High Court have committed a serious
      error in reinstating the contesting respondents and directing the
      appellant – principal employer to absorb them as their employees.
      The parties shall be governed by the CLRA Act and relief, if any,
D     could have been granted under the provisions of the CLRA Act
      and not under the MPIR Act. The judgment and order passed by
      the labour court is restored. [Paras 4.8, 5][341-G-H; 342-A-B]
            Steel Authority of India Ltd. and Ors. Vs. National Union
            Waterfront Workers and Ors. (2001) 7 SCC 1;
E           International Airport Authority of India Vs. International
            Air Cargo Workers’ Union and Anr. (2009) 13 SCC 374
            – relied on.
                             Case Law Reference
      (2001) 7 SCC 1                  relied on               Para 4.8
F
      (2009) 13 SCC 374               relied on               Para 4.8
            CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8446-
      8447 of 2022.
            From the Judgment and Order dated 09.03.2018 and 12.11.2018
G     of the High Court of Madhya Pradesh Bench at Indore in W.P. (S)
      No.1083 of 2004 and Writ Appeal No.813 of 2018 respectively.
            Anupam Lal Das, Sr. Adv., Ravi Bhardwaj, Anirudh Singh, Rahul
      Pratap, Krishanu Barua, Advs. for the Appellant.

H
  KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                                 333
                     ORS.

      The Judgment of the Court was delivered by                              A
      M. R. SHAH, J.
       1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 09.03.2018, passed by the learned Single Judge of the
High Court of Madhya Pradesh at Indore in W.P. (S) No. 1083 of 2004
and the impugned judgment and order dated 12.11.2018 passed by the            B
Division Bench of the High Court in W.A. (S) No. 813 of 2018, by
which the High Court has dismissed the said appeal(s) preferred by the
appellant herein – employer confirming the judgment and order passed
by the Industrial Tribunal ordering reinstatement and directing that the
concerned employees / workmen were the employees of the appellant –           C
principal employer, the principal employer – Kirloskar Brothers Limited
has preferred the present appeals.
      2. The case on behalf of the appellant – principal employer in a
nutshell is as under:-
       2.1 That respondent Nos. 1 to 6 herein were contractual labourers      D
of the respondent No. 7, who was a contractor engaged by the appellant
in terms of contract dated 22.04.1995, which was renewed from time to
time, including on 01.08.1995. Upon entering into the contract, necessary
compliances under Contract Labour (Regulation and Abolition) Act, 1970
(hereinafter referred to as “CLRA Act”) was completed by the appellant        E
and the respondent No. 7 - contractor. The labour contract came to an
end on 07.10.1996. Therefore, the services of the respondents were
dispensed with by the contractor. Accordingly, the appellant filed a return
under CLRA Act on 25.01.1997, which shows that the contract with the
respondent No. 7 had come to an end.
                                                                              F
      2.2 According to the appellant, all statutory payouts, including the
salary of the workmen were paid by the contractor since under the
CLRA Act, the ultimate responsibility would be upon the appellant if
these were not paid by the contractor. By letter dated 06.04.1996, the
appellant informed the contractor about deducting an amount of Rs.
7,224/- from the bill payable, for non-deposit of PF contribution for May,    G
1995.
       2.3 That thereafter, the respondents approached the Labour Court
praying inter alia that they were employees of the appellant, who have
been orally terminated by the respondent No. 7 and sought to be re-
instated in service. That the learned Labour Court vide judgment and          H
334            SUPREME COURT REPORTS                          [2022] 18 S.C.R.


A     order dated 14.03.2002, on appreciation of evidence returned a categorical
      finding that the Contractor had obtained license under the CLRA Act
      and that the contesting respondents were the employees of the contractor
      and not of the appellant.
             2.4 That upon appeal, the learned Industrial Tribunal passed an
B     order dated 05.02.2004, ordering reinstatement and holding that a contract
      labourer automatically becomes an employee of the principal employer.
      Thereafter, the Industrial Tribunal considered the definition of ‘employee’
      and ‘employer’ as contained in Sections 2(13) and 2(14) of the Madhya
      Pradesh Industrial Relations Act, 1960 (hereinafter called as “MPIR
      Act”).
C
            2.5 The judgment and order passed by the Industrial Tribunal has
      been confirmed by the learned Single Judge. The writ appeal filed against
      the judgment and order passed by the learned Single Judge has been
      dismissed as not maintainable and hence the appellant has preferred the
      present appeals challenging the judgment(s) and order(s) passed by the
D     learned Single Judge as well as by the Division Bench of the High Court.
            3. Shri Anupam Lal Das, learned Senior Advocate has appeared
      on behalf of the appellant.
            3.1 Shri Das, learned senior counsel has vehemently submitted
E     that as such the contesting respondents herein were the employees
      employed by the respondent No. 7 – contractor. It is submitted that
      therefore and in the absence of a notification under Section 10 of CLRA
      Act and there being no allegations or findings with regard to the contract
      being a sham, the contesting respondents could not have been held to be
      employees of the appellant and not of the contractor.
F
             3.2 It is submitted that neither Section 10 of the CLRA Act, nor
      any other provision in the Act, whether expressly or by necessary
      implication, provides for absorption of contract labour in the absence of
      a notification by an appropriate Government, namely, in the present case,
      the State Government, under sub-section (1) of Section 10, prohibiting
G     employment of contract labour, in any process, operation or other work
      in any establishment. It is submitted that in the present case, admittedly,
      no notification under Section 10 of the CLRA Act has been issued. It is
      submitted that therefore, in the absence of a notification under Section
      10 of the CLRA Act, which can only be passed by the appropriate
      Government, the Industrial Court could have given relief to the workmen
H
  KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                                  335
               ORS. [M. R. SHAH, J.]

only if they had claimed and proved by leading cogent evidence that the        A
contract with the contractor was a sham. It is further submitted that in
the present case, there was no such allegation or pleading or finding
arrived at by any Court that the contract between the parties was a
sham and not genuine. Heavy reliance is placed upon the decisions of
this Court in the case of Steel Authority of India Ltd. and Ors. Vs.
                                                                               B
National Union Waterfront Workers and Ors., (2001) 7 SCC 1
(paras 65, 108, 109, 120 and 125) and International Airport Authority
of India Vs. International Air Cargo Workers’ Union and Anr.
(2009) 13 SCC 374 (paras 36, 37 to 40, 53.13, 56).
       3.3 It is further submitted on behalf of the appellant that in the
present case, the Courts below were not justified in invoking the provisions   C
of the MPIR Act as against the provisions of the CLRA Act, which is
inconsistent in view of the provisions of Article 254 of the Constitution
of India.
        3.4 It is submitted that the learned Industrial Tribunal and the
High Court have materially erred in coming to a conclusion that the            D
contesting respondents were in the employment of the appellant despite
there being not a single document to buttress the same. It is submitted
that the only document filed by the contesting respondents was an ESI
identity card, which did not even bear the name of the appellant herein.
It is submitted that even the deduction of PF and/or PF contribution by        E
the appellant may not go against the appellant. It is further submitted
that on non-payment of the salary and/or PF contribution, it was the
responsibility of the appellant to pay the same and thereafter to deduct
the same from the amount due and payable to the contractor. Therefore,
the payment of contribution by the appellant cannot be a ground to confer
the employer-employee relationship between the appellant and the               F
contesting respondents.
       3.5 It is submitted that in the present case, none of the respondents
had produced any appointment issued by the appellant nor were they
given any benefits, uniform or punching cards, which were being provided
to all regular employees of the appellant. The direct control and              G
supervision of the respondents was always with the respondent No. 7 –
contractor. It is submitted that therefore, the only conclusion based upon
the record would be that the contesting respondents were the employee
of the contractor.
                                                                               H
336             SUPREME COURT REPORTS                         [2022] 18 S.C.R.


A            3.6 Making above submissions, it is prayed that the present appeals
      be allowed.
              4. Having heard learned senior counsel appearing on behalf of
      the appellant and the material on record, it appears that the contesting
      respondents herein were the contractual labourers of the respondent
B     No. 7 – contractor, who was a contractor engaged by the appellant in
      terms of the contract dated 22.04.1995, which was renewed from time
      to time. It is an admitted position in the present case that no notification
      under Section 10 of the CLRA Act has been issued by the State
      Government / appropriate Government, prohibiting the contract labour.
      It also appears that upon entering into the contract, necessary compliance
C     under the CLRA Act was also completed by the appellant and the
      respondent No. 7 – contractor. On the labour contract coming to an end,
      the services of the contesting respondents were dispensed with by the
      contractor.
             4.1 On going through the entire material on record, no documentary
D     evidence was produced, by which it can be said that the contesting
      respondents were the employees of the appellant. There is no provision
      under Section 10 of the CLRA Act that the workers/employees employed
      by the contractor automatically become the employees of the appellant
      and/or the employees of the contractor shall be entitled for automatic
E     absorption and/or they become the employees of the principal employer.
      It is to be noted that even the direct control and supervision of the
      contesting respondents was always with the contractor. There is no
      evidence on record that any of the respondents were given any benefits,
      uniform or punching cards by the appellant.

F            4.2 Under the contract and even under the provisions of the CLRA,
      a duty was cast upon the appellant to pay all statutory dues, including
      salary of the workmen, payment of PF contribution, and in case of non-
      payment of the same by the contractor, after making such payment, the
      same can be deducted from the contractor’s bill. Therefore, merely
      because sometimes the payment of salary was made and/or PF
G     contribution was paid by the appellant, which was due to non-payment
      of the same by the contractor, the contesting respondents shall not
      automatically become the employees of the principal employer – appellant
      herein.
             4.3 Even otherwise, as observed hereinabove, in the absence of a
H     notification under Section 10 of the CLRA Act unless there are allegations
  KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                                337
               ORS. [M. R. SHAH, J.]

or findings with regard to a contract being sham, private respondents        A
herein, who are as such the workmen/employee of the contractor, cannot
be held to be employees of the appellant and not of the contractor. At
this stage, the decision of this Court in the case of Steel Authority of
India Ltd. and Ors. Vs. National Union Waterfront Workers and
Ors. (supra) is required to be referred to. Following two questions fell
                                                                             B
for consideration before this Court:-
      A.     whether the concept of automatic absorption of contract
             labour in the establishment of the principal employer on
             issuance of the abolition notification, is implied in Section
             10 of the CLRA Act; and
                                                                             C
      B.     whether on a contractor engaging contract labour in
             connection with the work entrusted to him by a principal
             employer, the relationship of master and servant between
             him (the principal employer) and the contract labour,
             emerges.
                                                                             D
       4.4 After considering various decisions of this Court on the point,
in paragraph 125, it was concluded as under:-
      “125. The upshot of the above discussion is outlined thus:
         (1)(a) Before 28-1-1986, the determination of the question
      whether the Central Government or the State Government is the          E
      appropriate Government in relation to an establishment, will
      depend, in view of the definition of the expression “appropriate
      Government” as stood in the CLRA Act, on the answer to a further
      question, is the industry under consideration carried on by or under
      the authority of the Central Government or does it pertain to any      F
      specified controlled industry, or the establishment of any railway,
      cantonment board, major port, mine or oilfield or the establishment
      of banking or insurance company? If the answer is in the
      affirmative, the Central Government will be the appropriate
      Government; otherwise in relation to any other establishment the
      Government of the State in which the establishment was situated,       G
      would be the appropriate Government;
          (b) After the said date in view of the new definition of that
      expression, the answer to the question referred to above, has to
      be found in clause (a) of Section 2 of the Industrial Disputes Act;
      if (i) the Central Government company/undertaking concerned or         H
338      SUPREME COURT REPORTS                          [2022] 18 S.C.R.


A     any undertaking concerned is included therein eo nomine, or (ii)
      any industry is carried on (a) by or under the authority of the
      Central Government, or (b) by a railway company; or (c) by a
      specified controlled industry, then the Central Government will be
      the appropriate Government; otherwise in relation to any other
      establishment, the Government of the State in which that other
B
      establishment is situated, will be the appropriate Government.
      (2)(a) A notification under Section 10(1) of the CLRA Act
      prohibiting employment of contract labour in any process, operation
      or other work in any establishment has to be issued by the
C     appropriate Government:
           (1) after consulting with the Central Advisory Board or the
               State Advisory Board, as the case may be, and
           (2) having regard to

D                  (i) conditions of work and benefits provided for the
                contract labour in the establishment in question, and
                    (ii) other relevant factors including those mentioned
                in sub-section (2) of Section 10;
          (b) Inasmuch as the impugned notification issued by the Central
E     Government on 9-12-1976 does not satisfy the aforesaid
      requirements of Section 10, it is quashed but we do so prospectively
      i.e. from the date of this judgment and subject to the clarification
      that on the basis of this judgment no order passed or no action
      taken giving effect to the said notification on or before the date of
F     this judgment, shall be called in question in any tribunal or court
      including a High Court if it has otherwise attained finality and/or it
      has been implemented.
          (3) Neither Section 10 of the CLRA Act nor any other provision
      in the Act, whether expressly or by necessary implication, provides
G     for automatic absorption of contract labour on issuing a notification
      by the appropriate Government under sub-section (1) of Section
      10, prohibiting employment of contract labour, in any process,
      operation or other work in any establishment. Consequently the
      principal employer cannot be required to order absorption of the
      contract labour working in the establishment concerned.
H
KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                               339
             ORS. [M. R. SHAH, J.]

     (4) We overrule the judgment of this Court in Air India              A
  case [(1997) 9 SCC 377] prospectively and declare that any
  direction issued by any industrial adjudicator/any court including
  the High Court, for absorption of contract labour following the
  judgment in Air India case [(1997) 9 SCC 377] shall hold good
  and that the same shall not be set aside, altered or modified on the
                                                                          B
  basis of this judgment in cases where such a direction has been
  given effect to and it has become final.
      (5) On issuance of prohibition notification under Section 10(1)
  of the CLRA Act prohibiting employment of contract labour or
  otherwise, in an industrial dispute brought before it by any contract   C
  labour in regard to conditions of service, the industrial adjudicator
  will have to consider the question whether the contractor has been
  interposed either on the ground of having undertaken to produce
  any given result for the establishment or for supply of contract
  labour for work of the establishment under a genuine contract or
  is a mere ruse/camouflage to evade compliance with various              D
  beneficial legislations so as to deprive the workers of the benefit
  thereunder. If the contract is found to be not genuine but a mere
  camouflage, the so-called contract labour will have to be treated
  as employees of the principal employer who shall be directed to
  regularise the services of the contract labour in the establishment     E
  concerned subject to the conditions as may be specified by it for
  that purpose in the light of para 6 hereunder.
      (6) If the contract is found to be genuine and prohibition
  notification under Section 10(1) of the CLRA Act in respect of
  the establishment concerned has been issued by the appropriate          F
  Government, prohibiting employment of contract labour in any
  process, operation or other work of any establishment and where
  in such process, operation or other work of the establishment the
  principal employer intends to employ regular workmen, he shall
  give preference to the erstwhile contract labour, if otherwise found    G
  suitable and, if necessary, by relaxing the condition as to maximum
  age appropriately, taking into consideration the age of the workers
  at the time of their initial employment by the contractor and also
  relaxing the condition as to academic qualifications other than
  technical qualifications.”
                                                                          H
340             SUPREME COURT REPORTS                          [2022] 18 S.C.R.


A             4.5 Thus, as observed and held by this Court, neither Section 10
      of the CLRA Act nor any other provision in the Act, expressly or by
      necessary implication, provides for automatic absorption of contract labour
      on issuing a notification by the appropriate Government under sub-section
      (1) of Section 10, prohibiting employment of contract labour, in any process,
      operation or any other work in any establishment and consequently, the
B
      principal employer cannot be required to order absorption of the contract
      labour working in the establishment concerned. It has further been
      observed and held by this Court in the aforesaid decision that on issuance
      of prohibition notification under Section 10(1) of the CLRA Act,
      prohibiting employment of contract labour or otherwise, in case of an
C     industrial dispute brought before it by any contract labour in regard to
      conditions of service, the industrial adjudicator will have to consider the
      question whether the contractor has been interposed either on the ground
      of having undertaken to produce any given result for the establishment
      or for supply of contract labour for work of the establishment under a
      genuine contract or is a mere ruse/camouflage to evade compliance
D
      with various beneficial legislations so as to deprive the workers of the
      benefits thereunder.
            4.6 In the present case, neither any notification under Section
      10(1) of the CLRA Act has been issued prohibiting the contract labour,
      nor there are allegations and/or even findings that the contract is sham
E     and bogus and/or camouflage.
              4.7 In the case of International Airport Authority of India
      Vs. International Air Cargo Workers’ Union and Anr. (supra),
      after considering the decision of this Court in the case of Steel Authority
      of India Ltd. and Ors. Vs. National Union Waterfront Workers
F     and Ors. (supra), it has been observed and held by this Court that
      where there is no abolition of contract labour under Section 10 of the
      CLRA Act, but the contract labour contends that the contract between
      the principal employer and the contractor is sham and nominal, the remedy
      is purely under the ID Act. It is further observed that the industrial
G     adjudicator can grant the relief sought if it finds that the contract between
      the principal employer and the contractor is sham, nominal and merely a
      camouflage to deny employment benefits to the employee and that there
      is in fact a direct employment, by applying tests like: who pays the salary;
      who has the power to remove/dismiss from service or initiate disciplinary
      action; who can tell the employee the way in which the work should be
H
  KIRLOSKAR BROTHERS LIMITED v. RAMCHARAN AND                                 341
               ORS. [M. R. SHAH, J.]

done, in short, who has direct control over the employee. It is further       A
observed that where there is no notification under Section 10 of the
CLRA Act and where it is not proved in the industrial adjudication that
the contract was a sham/nominal and camouflage, then the question of
directing the principal employer to absorb or regularise the services of
the contract labour does not arise. It has further been observed in
                                                                              B
paragraphs 38 and 39 as under :-
          “38. The tests that are applied to find out whether a person is
      an employee or an independent contractor may not automatically
      apply in finding out whether the contract labour agreement is a
      sham, nominal and is a mere camouflage. For example, if the
      contract is for supply of labour, necessarily, the labour supplied by   C
      the contractor will work under the directions, supervision and
      control of the principal employer but that would not make the
      worker a direct employee of the principal employer, if the salary
      is paid by a contractor, if the right to regulate the employment is
      with the contractor, and the ultimate supervision and control lies      D
      with the contractor.
          39. The principal employer only controls and directs the work
      to be done by a contract labour, when such labour is assigned/
      allotted/sent to him. But it is the contractor as employer, who
      chooses whether the worker is to be assigned/allotted to the            E
      principal employer or used otherwise. In short, worker being the
      employee of the contractor, the ultimate supervision and control
      lies with the contractor as he decides where the employee will
      work and how long he will work and subject to what conditions.
      Only when the contractor assigns/sends the worker to work under
      the principal employer, the worker works under the supervision          F
      and control of the principal employer but that is secondary control.
      The primary control is with the contractor.”
       4.8 Applying the law laid down by this Court in the aforesaid two
decisions to the facts of the case on hand and in the absence of any
notification under Section 10 of the CLRA Act and in the absence of           G
any allegations and/or findings that the contract was sham and
camouflage, both the Industrial Tribunal as well as the High Court have
committed a serious error in reinstating the contesting respondents and
directing the appellant – principal employer to absorb them as their
employees. The parties shall be governed by the CLRA Act and relief, if       H
342              SUPREME COURT REPORTS                    [2022] 18 S.C.R.


A     any, could have been granted under the provisions of the CLRA Act and
      not under the MPIR Act.
            5. In view of the above and for the reasons stated above, the
      present appeals are allowed. The impugned judgment(s) and order(s)
      passed by the High Court in W.P.(S) No. 1083 of 2004 and W.A. No.
B     813 of 2018 as well as the judgment and order passed by the Industrial
      Tribunal are hereby quashed and set aside. The judgment and award
      passed by the Labour Court is hereby restored.
            Present appeals are accordingly allowed. However, in the facts
      and circumstances of the case, there shall be no order as to costs.
C
      Nidhi Jain                                              Appeals allowed.
      (Assisted by : Shashwat Jain, LCRA)




D




E




F




G




H


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